August 6, 2014
What Do Your PPC Numbers Mean? Part 1
You just got the latest results from your PPC campaign and the click through rate reached 9.05%, ad position increased to 2.5 and impression share is hovering around 80.50%. And you think to yourself ‘That’s fantastic…right?’.
Welcome to the sometimes overwhelming world of PPC with numbers and statistics galore. Specialists throw figures at you like Clicks, CPC, CTR, Impressions, Impression Share, Conversions, Cost Per Conversion, Conversion Rate, and Ad Position plus many more.
The question all marketers need to ask themselves is, ‘What does it mean?’. Are these figures actually good for your business? And, out of all the numbers, which ones should you be focusing on when that report comes in?
The truth is; there are no two or three metrics that every business should focus on and no reliable industry benchmarks exist for each of these anyway. Every single metric plays a part in the overall PPC strategy and therefore none should be discounted. Below are some of the most common metrics you will see and simple explanations of what they might mean for your business.
Impressions are one of the hardest metrics to benchmark as they are so dependent on the number of clicks you are getting. If exposure and brand awareness is a key focus of the business, which is particularly common for display campaigns, then it may be an important metric to consider for your business.
Internal benchmarking is the most effective method so if impressions are lower than in previous months you may need to increase the budget, expand the targeting, or sacrifice a premium ad position and reduce what you are willing to pay for each click. If exposure and brand awareness isn’t a focus however, this isn’t a metric to worry about too much.
Clicks are strongly related to traffic to your site so if a focus of the PPC campaign is to increase traffic, clicks will be a key metric to optimise around. New or niche businesses that don’t have a lot of organic traffic may choose to focus on clicks as each user that visits the company’s website has the opportunity to learn more about the business.
The number of clicks you get is often reliant on your budget, as you get charged on a per click basis. Therefore the more budget, generally the more clicks you can afford. Similar to optimising for impressions, you may need to increase the daily budget, reduce what you are willing to pay per click or, if you have enough budget, expand targeting variables such as keywords or geographic regions.
Most clients though need to focus on getting quality traffic through to their site, not necessarily quantity, so the overall number of clicks wouldn’t be a key metric for most companies.
CTR is often the metric marketers focus on the most due to the standardised nature of it; it’s not influenced by the size of the budget or campaign. However huge industry fluctuations make a benchmark CTR almost impossible.
CTR represents how attractive your ad is to a user, as the better the ad; the more likely they are to click on it. It is therefore essential that all ads created in a campaign are highly relevant, keyword rich, engaging and include a strong call to action. It’s not just the ad copy that will determine CTR though, it is essential the entire campaign has been structured so that each ad is as relevant to the user as possible through a range of targeting options such as; keywords, geography, and time.
Again, the best benchmark for this will be your campaign’s historical data as it takes into account your industry and unique business.
As CPC is an average, some clicks will cost more than this and some will cost less. In each of your keywords or AdGroups, you set the most you are willing to pay per click (max CPC) however what you actually pay may be lower depending on the level of competition and the quality score of your campaign.
Average CPCs can vary from as little as $0.10 to over $100.00, depending on the industry and business. Due to this huge individual variation, the most effective method of analysing your average CPC is to compare it to your own previous data.
If your average CPC has increased significantly it could be the result of changes to the campaign including; expensive new keywords, changing ad copy that either doesn’t include relevant keywords or achieves a lower CTR (reducing quality score), technical issues on your landing page (that also affect quality score), or positive bid adjustments recently added (for example mobile devices, times of the day or geographic regions).
However if the average CPC continues to rise every month without major campaign changes you may want check the quality score (to see if this may be declining) and auction insights (to see if new competitors are entering the auctions you are participating in, driving the cost up).
A lot of clients want to ensure their brand is #1 in Google at all times which is understandable. However the ‘status’ associated with an average position of 1.0 may not translate to profitable results. The top ad positions are often more expensive and therefore may stretch your budget, limiting your total clicks you can afford and therefore also limiting the conversions you may receive.
In order to achieve a good ad position you will need to outrank the competitors however the good news is that it isn’t just based on what you are willing to pay. Google rewards relevant campaigns with a high quality score (based on CTR, relevance and landing page) and this quality score combined with your CPC bid, will determine where your ad ranks.
Therefore if you are looking increase your ad position without spending more, it is essential to focus on creating engaging, relevant ads that lead to great landing pages. It may also be helpful though to trial different ad positions, by altering your CPC bids, to see how your overall ROI changes for a variety of ad positions.
Conversions should be a key focus for most businesses as these are the direct results of the campaign. You therefore need to make sure that all conversions, big or small, are tracked using Google Analytics and, if users can call your business, phone tracking as well. All campaigns should be optimised based on conversion data; therefore it needs to be correct and up to date.
If conversions are lower than expected, you may need to increase your budget or lower your CPC (in order to increase the number of clicks you can afford) or optimise your landing page for conversions.
An effective PPC campaign can drive quality traffic to your site however a once user clicks on an ad, the landing page needs to then convert through the use of strong call to actions and easy conversion methods. Your business may also need to focus on adding benefits for a user to convert, so the benefits outweigh the costs, leading to the perception of value.
For example, if your conversion is filling in an enquiry form, you may need to add value by giving them access to some hard to find information. Or you could use a free shipping offer to encourage online purchases. If a user perceives value, they are more likely to convert.
The conversion rate of the campaign will vary greatly depending on the industry and also the business. Individual historical data should again be used to benchmark results as it will allow you to compare current results based on your own unique business data.
In order to increase the conversion rate you should look at refining the keywords targeted to ensure irrelevant traffic isn’t coming to the site, and adjusting the focus of the campaign based on what is already converting so you can increase overall conversions. You may need to pause some keywords that have not led to conversions or reduce the amount you are willing to spend on them.
Similarly, if you have identified high performing keywords or AdGroups, you may want to increase your max CPC bid or allocate a separate budget to ensure they get the exposure they need.
A cost per conversion is one of the best metrics to focus on as long as all conversions being measured have a value associated with them. By comparing the value of the conversion, with the cost of the conversion, you are able to determine the value for the business.
First though, each conversion needs to have a value that is unique to the conversion type. For example, a user who fills out an enquiry form should not be valued the same as someone who just downloaded a PDF.
You should ensure that macro and mirco conversions have the appropriate value associated to them based on the revenue they are likely to bring to the business. Therefore in most cases, Google Analytics should be used to separate all conversions and optimise the campaign based on value associated.
A lot of people struggle to benchmark the results of a PPC campaign if they don’t associate value to the conversion. Internal data can be used to estimate the value of most conversions. For example, if you get 10 enquiries from your PPC campaign, you may know based off internal data that the average sales rate is 20% and the average sale value is $150. You can then estimate that the PPC campaign brought in 2 sales, totalling $300. From there, you can compare these sales estimates to the cost per conversion to see if the campaign is achieving a positive return.
Optimisations can then be performed to ensure an appropriate cost per conversion is achieved to create value for the business and achieve a positive ROI.
So those are the basic metrics of Google Adwords that you’ll find in your next PPC report. Hopefully these quick explanations will help you better understand how your PPC campaign is performing for your business and what you might be able to do to improve your results.
Impressions indicate how often your ad has appeared on a search results page (for search campaigns) or website (for display campaigns) on the Google Network.
A click is when a user interacts with your ad by clicking on it, typically showing an intention to learn more about what you offer. For all Google search campaigns, you get charged per click.
Click-through rate (CTR) is the number of clicks your ad receives divided by the number of times your ad is shown (impressions).
Average cost-per-click (CPC) is the average amount that you’ve been charged for a click on your ad.
Avg ad position
Average position helps explain where your ad ranks on Google compared to other ads.
A conversion is a customer action that has value to your business, such as purchase, downloading an app, visiting a website, filling out a form or signing a contract. Online and offline actions are called conversions because a customer’s click translated – or converted – to business.
The conversion rate tells you how often someone’s click on your ad resulted in a conversion – that is, that person going on to complete a desired action on your landing page.
Cost per conversion
Cost per Conversions is the total cost of generating traffic divided by the total number of conversions. Note that the cost includes that of all traffic during which conversions were measured, including traffic during that time that didn’t lead to a conversion.
Next time, I will go through some of the more complex metrics such as; impression share, view through conversions and assisted conversions to help you determine what additional areas you may need to focus on for your business.